Exchange Invest Weekly Podcast 024

Transcript

In people news, “the best of times, the worst of times,” but something very exciting for the Parish throughout. Of course, that's all wrapped in with wonderful letters for Santa, a couple of deals and much, much more! Welcome to the Exchange Invest Weekly with me, Patrick l young.

Before we get down to the weeks wheeling and dealing, this episode of the Exchange Invest Weekly, number 24 no less is recorded against the backstop of it being Saint Nicholas day. What more appropriate message could there be than the fact that on Thursday, the European Union's financial watchdog ESMA called for a single feed for stock prices. across the region. This amounts to perfect seasonal timing to be reporting on St. Nicholas day, and indeed in a world exclusive Exchange, Invest has been able to find the original ESMA memo containing the distributed tape request, which reads as follows:

“Dear Santa, as you may know, our efforts to deliver a consolidated tape across European stock market prices have to date been an even greater failure than our Capital Markets Union plans. Even without the UK, we're still nowhere near getting this done as 27 nations. So as we have all been good boys and girls this year - even the ones in Brussels assure me this is true - We were wondering if you, Santa, could bring us a single pricing stream for Christmas?

Yours sincerely Stephen Maijoor

& the ESMA team.”

And in deal news this week, the Swiss exchange operators SiX have added three major Spanish banks in their attempt to court BME. They've been added to the investment banker register, those people who are going to be working assiduously to get the deal over the line on behalf of the Swiss exchange group. So Santander, BBVA and Caixa Bank have all joined the SiX advisors roster, making for a pretty compelling argument one suspects on the ground in Spain that SiX is leading the way. Indeed, I think that perhaps suggests that Euronext is sitting out the bidding for now. What on earth can be on their minds?

Meanwhile, they did conclude one minor deal this week: Euronext are going to buy a controlling stake 66% of the share capital of the Nordic power market operator Nord Pool - interesting acquisition on top of their Oslo Bors buy to acquire the neighboring energy pool hub physical power market. Not a huge amount of money, the whole enterprise value basis about $93 million dollars, but nonetheless quite interesting, particularly given the fact that Euronext with a 34% minority stake through a joint holding company held by the previous owners, that means that the Paris based or at least, strictly speaking, Amsterdam based, but we all know it's Paris based. Euronext is going to be entering into the power market with strong and experienced partners. That's very, very interesting because of course, it adds Euronext power back into its mix.As you may recall Powernext, which is now part of EAX, which then became part of DB1, was part owned from its foundation in 2000. AD by Euronext but they ultimately sold their stake in 2008, during the Duncan years. It's an interesting low cost acquisition for Euronext which can't do the entity any harm, albeit the asset portfolio is beginning to sprawl a little, even if Nord Pool is Oslo based.

This week we've heard that CBOE amongst others is talking with Euro CCP over a possible takeover. CBOE Europe clearly needs to protect its CCP clearing relationship for cash equities. But at the same time, it's equally possible that several of the other parties that are already shareholders, including for example, DTCC, amongst others, may also want to exert the same sort of right to hold on to their stakes and Euro CCP, including, of course, their most recent investor, which was Euronext only a couple of years back.

In the Turkish financial sector, JCR Eurasia which seems to be being set up as the National credit rating agency which the government under President Erdogan was trying to create a few months back. Therefore the Japan credit rating agency is only going to hold 14.95%. They are after all, the JCR in JCR Eurasia. Bourse Istanbul is going to hold 18.5%. And overall the Turkish financial sector will represent 85.05% of the venture.

News from Borsa Kuwait: the IPO there appears to be more than 8.5 times oversubscribed, which is very healthy.

And there has been a lot more speculation during the course of the week: The Wall Street Journal jumping in where I was talking about this in the last week in the Exchange Invest Newsletter and indeed on this podcast. Bloomberg 2020: The buyout not the candidate, given the Pravda-like approach of Mr. Bloomberg in his candidacy. Well, if that candidacy birth has not already been killed through his Pravda-like approach; his desire to be the self appointed Messiah of the Democrats suggests to many, not just me, that obviously Bloomberg Inc is for sale: the Wall Street Journal seem to be joining the fray, as otherwise the path to the White House is surely simply too difficult in a world where 2500 qualified Bloomberg journalists are somewhat justifiably being branded as fake news franchisees. Amongst the new markets we saw this week, Dmitry Galinov’s new FX derivatives exchange has gone live trading its first FX NDF product at 24 Exchange. Over in India, the National Stock Exchange consolidated net profit Rose 5.75% in the September quarter, while in Johannesburg, the Stock Exchange there has joined hands with the African Development Bank and a group of other exchanges to endeavor to create cross border investment opportunities throughout the continent of Africa. The Luxembourg Stock Exchange we don't hear from very often, they've acquired a minority 10% stake in the bond issuance startup Origin in an effort to try and bring bond sales closer to automation, because that's going to be very important for Luxembourg: Given that the Luxembourg Stock Exchange itself is a huge listing venue of public But not very publicly traded massive bonds and other entities special purpose vehicles and the like where Luxembourg Stock Exchange squares off very very strongly against the likes of the Irish Stock Exchange now Euronext Dublin.

Intrade co-founder Ron Bernstein who I remember well from my time indeed as a co founder of Tradesports GSX Intrade myself, well Ron is quite the indefatigable figure. He has taken the software, the operations and everything else of Intrade and he is trying to make it work one more time. Gosh 20 years on from the original launch pretty much: what is it 1918 and a half 19 years something like that since Tradesports originally came to life! Quite fascinating altogether it will be intriguing to see if he can make the original concept come to life now that the US regulatory winds appear to be appear to be blowing in the right way. All the best Ron.

Similarly in betting platform news, The Hong Kong Jockey Club is trying to block Betfair Australia from using its races in any way. That's a long running spat since Betfair tried to launch their own exchange in Hong Kong, competing with the SARs horse racing behemoth.

Meanwhile, the Winklevoss brothers, they're trying to move Gemini exchange into Europe, they've been hiring various parties, including the co founder of Starling bank.

And indeed, the Shanghai Gold Exchange is muling entry into India's gold import market which could prove well enough to give Sebi a coronary.

In other news, quite fascinating BreakingViews the Reuters offshoot. They mentioned the fact that the London Shanghai bridge leads back to Hong Kong, noting the fact that barely weeks after the LSE’s management placed myopic self interest above the good of both the bourse they are stewarding and the London financial center. What we're now seeing is that effectively listings are preferring the fact that the London hungry Shanghai link is merely a representative office linkage compared to what is the full branch status of Hong Kong's myriad linkages to the Chinese mainland. To which end Hong Kong exchange is the proven listing venue. And if only the good folks at the London Stock Exchange had been listening, they too could have been part of that success story.

In clearing houses this week, there was an interesting story in Risk about clearing house power downs raising fears amongst members: well worth a read. Meanwhile, Wall Street managed to notch a first win against the European Union's derivatives clearing houses where the European Union and the Euro Parliament have - well, as their want on so many occasions - come in with a rather restrictive ethos. They're looking for the clearing houses to put in more capital at the first juncture, which is obviously something the clearing house industry has been quite understandably trying to resist for the simple reason that this ends up meaning that the rest of us are now mutualising the risks that the banks don't want to pay for in the clearing house system.

Over in Germany, a German stated stated the obvious: the Cum-ex trading scheme was illegal. Hashtag zero shock.

In people news, the Pakistan Stock Exchange is expected to appoint a Pakistani national as CEO this time around after their unfortunate relationship with their Canadian CEO ended in tears a few months back. Equally that may come as somewhat of the blue to the Chinese stakeholders that have invested in the Pakistani exchange who may have been hoping to parachute in an executive from the Chinese mainland.

Elsewhere... And then of course the big people news of the week that we flagged in our last edition Kelly Loeffler, the Boss of the crypto exchange Bakkt, a longtime senior executive of the Intercontinental exchange: She is going to be the next US Senator for Georgia. Joining the ticket there taking up the end of the senate term of Senator Isakson who unfortunately due to illness has had to stand down. It has to be said I'm already signed up for the Loeffler for president campaign, whether it's 2024 28, 32, or indeed whenever she chooses to run. Kelly will have a special election in the meanwhile in the presidential cycle, 2020, to win, that will allow her to complete the term through 2022 when she'll be able to stand for her own mandate for the Senate in the normal senate cycle for her position in Georgia. It's great news for the parish, a brilliantly capable woman added to the Senate, a “win win” for the parish and for the US markets and indeed for the US governmental system. All the very very best to Kelly albeit in many senses. It is “the best of times and the worst of times” for the parish as we will Losing one of our most pragmatic and excellent parishioners. Anyway, good luck to Kelly as she becomes one of the well 110, 111 most important folks in the USA I'm calculating that as being POTUS the VP, 100 senators, the speaker of Congress, the justices of the Supreme Court, etc. which gets us to 110 / 111 people overall, it's great news for the parish, a shame for ICE and Bakkt those who write off ICE on the basis of one excellent staffer departing have invariably been proven wrong. And indeed, that's what they will be proven in due course with their European Clearing House where their boss Finbar Hutcheson is standing down two and a bit years after he took over from the retiring Paul Swann. No news on new appointments either to lead Bakkt or indeed to be the head of the ICE Europe Clearing House at the moment but we wish all parties a very successful and happy existence after the ICE experience.

Deutsche Boerse: they have confirmed what we reported in August as a rumor Martin Jetter former senior executive with IBM is going to succeed the somewhat hapless failed chairmanship of Joakim Faber. Therefore, Faber will resign as expected from the Supervisory Board at the end of the Annual General Meeting on 19th May 2020. All the very best to Martin Jetter as he takes over Deutsche Boerse. So while it remains well somewhat rudderless as an organization, and under the chairmanship of Joakim Faber certainly DB1 was not without it's well, not too many thrills, but unfortunately rather a lot of spills: daft crazy bids for the LSE and the fabulously inept CEO who was ousted through, well, what might be politely described as a very unsavory brush with authorities amid hints of and undertones of insider dealing, amongst other things.

Elsewhere during the course of the week, the European Union's banking watchdog told banks “get a grip on costs or merge or close.” What wonderful news, I do look forward to this very coherent advice being applied to the European Union's own agencies and institutions in due course.

In technology news, I suppose the most exciting thing we saw was that actually the Pakistan Stock Exchange gave us a number that it's costing them to acquire trading and surveillance systems from China's Shenzhen Stock Exchange, of course, also a stakeholder in the Pakistan exchange: $2.85 million is the number that they're giving for that which strikes me as being well certainly not the cheapest deal around but it's way way way miles and miles and miles and miles and continents away from what it could have been at the most expensive end of the deal.

In a regulation news elsewhere, we had news from the US regulator, the ESMA folks saying that mifid to rules have failed on market data costs. No need to narrow the scope there ESMA MIFID II has failed full stop. Meanwhile, speaking of ESMA, they have approved another clearing house not it has to be said that they're recognizing instantaneously London's massive global Central Counterparty clearing houses which have oodles of capital, but rather they've recognized their first Indian clearing Corporation MCXCCL, which I agree looks like a number in Roman numerals. The MCX is commodity clearing CCP, it's great news for them. They're now going to have full ESMA recognition. But it does raise this huge question, ladies and gentlemen, just when will ESMA be allowed to actually regulate instead of being a political arm of the protectionist Brussels superstate?

In product news, Alibaba is Hong Kong shares got fast entry into the Hang Seng Composite Index: no surprise whatsoever there. Meanwhile, lots of concern as always about the demise of libor with no great clarity coming from the governmental figures who seem to be urgently trying to kill it off.

Meanwhile, we heard some news of the ECB: the European Central Bank is plotting a crypto rival to beat as the Forbes headline put it, “evil Bitcoin.” Okay, how can I put this charitably? Let's just say the European Central Bank already has in startup terminology, Well, a fast fail culture for developing currencies. How can their Bitcoin replacement possibly do anything but succeed on the back of the lessons they've already learned?

And so ladies and gentlemen in a week where we saw the first senator of the parish and the first female Senator of the parish indeed, second female senator in the history of the state of Georgia I do believe to represent that huge and thriving state. Amongst other things, a new chairman for the Deutsche Boerse and all manners of interesting wheels and deals into Scandinavia with North Pole and the possibility of something happening to rationalize the shareholding of Euro CCP, let alone the ongoing battle for BME, where intriguingly, Euronext seem to be amazingly quiet. Does that mean that indeed Borsa Italiana is going to be coming into play soon?

Ladies and gentlemen, on that note, lots to ponder for the course of the next week. My name is Patrick L. Young Thank you for listening to the Exchange Invest Weekly I'll be back with the daily newsletter for subscribers of the business of bourses Exchange Invest on Monday. And in the meanwhile, I hope you all have a great week in markets...

Links

EU Watchdog Calls For Single Feed For Stock Prices Across Region

Reuters

PLY: Perfect seasonal timing to report on St Nicholas day. (World Exclusive) We have been able to find the original ESMA memo concerning the distributed tape request which reads as follows:

“Dear Santa,

As you may know our efforts to deliver a consolidated tape across Europe have to date been an even greater failure than our Capital Markets Union plans. Even without the UK we’re still nowhere near getting this done. So, as we have all been good boys and girls all year - even the ones in Brussels assure me this is true - we were wondering if you could bring us a single pricing stream for Christmas?

Yours Sincerely,

Steven Maijoor and the ESMA team”

Swiss Exchange Operator Six Adds Spanish Banks To Court BME -Sources

Reuters

Euronext To Buy Control Of Nordics Power Market Operator Nord Pool

Reuters

Euronext To Acquire Control Of Nord Pool, A Leading Physical Power Market In Europe, Reinforcing Oslo As Euronext’s Hub In The Nordics

Globe Newswire

CBOE In Talks With EuroCCP Over Possible Takeover

Financial News

CBOE Mulls Different Options To Acquire Clearinghouse Euroccp

Finance Magnates